Does anyone know in detail how do the Brokers compute PORTFOLIO MARGIN?

Discussion in 'Options' started by tabasco mark, Nov 29, 2011.

  1. Knowing what your TIMS requirement will be is no big deal if you understand options and are already modeling your risk based on the current vol surface – which should be a prerequisite to trading options.

    The problem comes in when dealing with all the specific rules and restrictions of your particular broker. IB has enough requirements specific to their company that TIMS is really not relevant, you have to know how to model to their rules. This is usually because certain brokers believe that the TIMS requirements are not high enough.
     
    #11     Nov 30, 2011
  2. I totaly agree with you , but when I tried understanding
    those restrictions in TOS with the person in charge
    I had the feeling he knows less than me or
    he doesn't want to reveal those specific requirements ..
     
    #12     Nov 30, 2011
  3. Knowing what your margin requirement will be is important, so you have to bug your broker as much as possible to find out what exactly their rules are. But if you don’t over leverage you should never come close to those requirements except in extreme circumstances, so knowing “about” what the requirements are should be good enough. The real problem with any broker is that they can change their requirements instantly for any reason they want. So you could be in line one day, then something happens to scare the brokers and they double their requirements and then you could be out of line and forced out of your positions.
     
    #13     Nov 30, 2011
  4. You would think that they are obliged to
    publis these requirements but it seems
    the opposit - both TOS and IB and no other
    Broker I know of - don't specify and publish
    a clear Margin Guideline that will specify what
    are their requirements ..

    I realy don't know why ..
     
    #14     Nov 30, 2011
  5. rmorse

    rmorse Sponsor

    You're correct. And, PM is very new to most online brokers and most customer service agents will not be educated enough to help. Plus, they are restricted as to how they answer questions. You'll NEVER get to talk to the risk manager. In the end, if you trade with leverage, it's your responsibility to understand the rules that you trade within. This will be your best protection. It's your money.
     
    #15     Nov 30, 2011
  6. Hey, The ET crowd never have losing trades, hence no drawdowns. Problem solved.
     
    #16     Nov 30, 2011
  7. rmorse

    rmorse Sponsor

    oops.....my bad
     
    #17     Nov 30, 2011
  8. ids

    ids

    The problem with explanation of portfolio margin is complexity. Even if a person understands all the rules, application of these rules depends on a ton of numbers produced by the OCC and in house (IB) every day. One will have a huge problem to put it all together even if we publish everything. For example, I know all the rules and have an access to all the numbers. Let's say the portfolio is relatively simple. I will have a hard time to calculate margin manually. I cannot do it without help of a pretty complex computer program. How to explain it to a customer in a relatively simple form?
     
    #18     Nov 30, 2011
  9. I have to thank ids who explained to me several
    points I was not aware of.

    I think it is probably difficult to produce a specific
    calculation on a trade but there must be an
    inbetween option of knowing some of the
    basic rules that are important to the Broker .
    at the moment there is no such document published
    by any Broker .
     
    #19     Nov 30, 2011
  10. #20     Nov 30, 2011